Friday, December 6, 2013

SEC Litigation Releases: Week in Review

SEC Obtains Final Judgment Against Massachusetts-Based Broker and Investment Adviser, December 5, 2013, (Litigation Release No. 22885)

Final judgments were entered against Arnett L. Waters and two entities he controlled, "broker-dealer A.L. Waters Capital, LLC and investment adviser Moneta Management, LLC," for their alleged involvement in the "fraudulent sales of fictitious investment-related partnerships." The final judgment enjoins the defendants from future violations of the securities laws and orders them to pay over $839,000 in disgorgement. The disgorgement has been deemed "satisfied by a restitution order of over $9 million in a parallel criminal proceeding."

In August, criminal charges were filed against Waters based on SEC charges that he allegedly "had violated the court's preliminary injunction and asset freeze order by establishing an undisclosed bank account, transferring funds to that account, dissipating assets, and failing to disclose the bank account to the Commission."  In November, Waters pled "guilty to sixteen counts of securities fraud, mail fraud, money laundering, and obstruction of justice arising out of both the conduct that is the subject of the Commission's civil action and a criminal scheme through which Waters defrauded clients of his rare coin business out of as much as $7.8 million." Waters was sentenced to 17 years in prison, with three years of supervised release and ordered to pay over $9 million in restitution and forfeiture. In December, the SEC banned Waters from the securities industry based on "his guilty plea in the criminal contempt action."

Court Orders Edward M. Daspin to Comply with Commission Subpoena, December 4, 2013, (Litigation Release No. 22884)

Last week, the court ordered  Edward Michael Daspin, also known as "Edward Michael" and "Ed Michael," "to comply with an investigative subpoena calling for his testimony." Additionally, the court "denied Daspin's cross-motion for a protective order to limit the SEC to examining Daspin through written questions or alternatively to require the agency to pay for his personal physician to attend the testimony."

District Court Enters Final Judgment of Permanent Injunction and Orders a Penny Stock and Officer-And-Director Bar Against Defendant Thomas Gaffney, December 3, 2013, (Litigation Release No. 22883)

A final judgment was entered against Thomas Gaffney, who along with Health Science Group, Inc., allegedly "engaged in a fraudulent scheme involving HESG's stock, illicit kickbacks, and phony agreements to mask those kickbacks." The judgment permanently enjoins Gaffney from violating the securities laws, places a penny stock bar against him, and permanently bars him from "acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act or that is required to file reports pursuant to Section 15(d) of the Exchange Act."

SEC Files Civil Injunctive Action Against Charles Raymond Langston III for Insider Trading and Rule 105 Violations, December 3, 2013, (Litigation Release No. 22882)

According to the complaint (PDF), Charles Raymond Langston III used insider information to trade AutoChina stock. He allegedly made over $190,000 from the illegal trades. The complaint further alleges that Langston through his companies,  Guarantee Reinsurance and CRL Management, "made short sales in advance of separate secondary offerings by Wells Fargo, Mitsubishi UFJ Financial Group, and Alcoa, and he purchased shares in the same offerings." Langston has agreed to a final judgment that orders him to pay over $408,000 in disgorgement, prejudgment interest, and penalties. Langston, Guarantee Reinsurance, and CRL Management have also agreed to be enjoined from future violations of the securities laws. "Monetary sanctions against the defendant...will be determined by the court at a later date."

Ohio-Based Broker Barred from Penny-Stock Offerings, December 2, 2013, (Litigation Release No. 22881)

A final judgment was entered against Matthew K. Lazar for his "alleged participation in a boiler room operated by Edward M. Laborio." Specifically, the SEC claimed that "Lazar raised $585,000 from 10 investors through the sale of a PIPE (private investment in a public equity) by misrepresenting that the PIPE guaranteed an annual 8.5% dividend and that it was safe, like a fixed annuity or a certificate of deposit." Lazar consented to the judgment,which permanently enjoins him from future violations of the securities laws, imposes a 3-year penny stock bar against him, and orders him to pay almost $20,000 in disgorgement and prejudgment interest. The payment of disgorgement and prejudgment interest has been waived based on Lazar's "sworn statement of financial condition."

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